There are some things money can’t buy—friendship, for example. If I wantmore friends than I have, it clearly wouldn’t work to buy some. A hiredfriend is not the same as the real thing. Somehow, the money that wouldbuy the friendship dissolves the good I seek to acquire.

But most goods are not of this kind. Buying them does not ruin them. Considerkidneys. Some people favor a market in human organs; others are opposed. Butthose who oppose the buying and selling of kidneys cannot argue that a market inkidneys would destroy the good being sought. A bought kidney will work, assuminga good match. So if a market in human organs is objectionable, it must be for someother reason. Money can buy kidneys (as the black market attests); the question iswhether it should be allowed to do so.

In my book What Money Can’t Buy: The Moral Limits of Markets, I try to show thatmarket values and market reasoning increasingly reach into spheres of life previouslygoverned by nonmarket norms (Sandel 2012). In procreation and childrearing,health and education, sports and recreation, criminal justice, env ironmental protection,military service, political campaigns, public spaces, and civic life, money andmarkets play a growing role. I argue that this tendency is troubling; putting a priceon every human activity erodes certain moral and civic goods worth caring about.We therefore need a public debate about where markets serve the public good andwhere they don’t belong.

In this article, I would like to develop a related theme: When it comes todeciding whether this or that good should be allocated by the market or bynonmarket principles, economics is a poor guide. On the face of it, this may seempuzzling. Explaining how markets work is a central subject of economics. So why haseconomics failed to provide a convincing basis for deciding what should, and whatshould not, be up for sale?

The reason lies in the conception of economics as a value-neutral science ofhuman behavior and social choice. As I will try to show, deciding which social practicesshould be governed by market mechanisms requires a form of economic reasoningthat is bound up with moral reasoning. But mainstream economic thinking asserts itsindependence from the contested terrain of moral and political philosophy. Economicstextbooks emphasize the distinction between “positive” questions and normativeones, between explaining and prescribing. The popular book Freakonomics states thedistinction plainly: “Morality represents the way we would like the world to work andeconomics represents how it actually does work.” Economics “simply doesn’t traffc inmorality” (Levitt and Dubner 2006, pp. 11, 46, 190; see also Robbins 1932).

Moral Entanglements

Economists have not always understood their subject in this way. The classicaleconomists, going back to Adam Smith, conceived of economics as a branch ofmoral and political philosophy. But the version of economics commonly taughttoday presents itself as an autonomous discipline, one that does not pass judgmenton how income should be distributed or how this or that good should be valued.The notion that economics is a value-free science has always been questionable. Butthe more markets extend their reach into noneconomic aspects of life, the moreentangled they become with moral questions.

To be clear, I am not writing here about the standard textbook limitationson markets. A considerable body of economic analysis is devoted to identifying“market failures,” or situations in which unaided market forces are unlikely toproduce an efficient result, such as imperfectly competitive markets, negative andpositive externalities, public goods, imperfect information, and the like. Anotherbody of economic literature addresses questions of inequality. But this literaturetends to analyze the causes and consequences of inequality while claiming to beagnostic on normative questions of fairness and distributive justice. Outsourcingjudgments about equity and fairness to philosophers seems to uphold the distinctionbetween positive and normative inquiry.

But this intellectual division of labor is misleading, for two reasons. First, asAtkinson (2009) has recently observed, “economics is a moral science,” despiteprotestations to the contrary. Efficiency only matters insofar as it makes societybetter off. But what counts as better off? The answer depends on some conceptionof the general welfare or the public good. Although “welfare economics haslargely disappeared” from mainstream economics in recent decades, Atkinsonwrites, “economists have not ceased to make welfare statements.” Articles in journalsof economics “are replete with welfare statements” and reach “clear normativeconclusions,” he states, even though the principles underlying those conclusions golargely unexamined. Mostly, the conclusions rest on utilitarian assumptions. But asJohn Rawls and other philosophers have pointed out, utilitarianism seeks to maximizewelfare without regard for its distribution. Atkinson calls for a revival of welfareeconomics that acknowledges the defects of utilitarianism and considers a broaderrange of distributive principles.

A second reason to doubt that economics can be a value-free science of socialchoice points beyond debates about distributive justice to debates about commodifi -cation: Should sex be up for sale? What about surrogate motherhood, or pregnancyfor pay? Is there anything wrong with mercenary armies, and if so, how should militaryservice be allocated? Should universities sell some seats in the freshman class inorder to raise money for worthy purposes, such as a new library, or scholarships forwell-qualififi ed students from poor families? Should the United States sell the rightto immigrate? What about allowing existing US citizens to sell their citizenship toforeigners and swap places with them? Should we allow a free market in babies upfor adoption? Should people be allowed to sell their votes?

Some of these controversial uses of markets would improve efficiency byenabling mutually advantageous exchanges. In some cases, negative externalitiesmight outweigh the benefits to buyers and sellers. Even absent externalities,however, some market transactions are objectionable on moral grounds.One such ground is that severe inequality can undermine the voluntary characterof an exchange. If a desperately poor peasant sells a kidney, or a child, thechoice to sell might be coerced, in effect, by the necessities of his or her situation. Soone familiar argument in favor of markets—that the parties freely agree to the termsof the deal—is called into question by unequal bargaining conditions. In order toknow whether a market choice is a free choice, we have to ask what inequalities in thebackground conditions of society undermine meaningful consent. This is a normativequestion that different theories of distributive justice answer in different ways.

A second moral objection is not about fairness and tainted consent, but aboutthe tendency of market practices to corrupt or crowd out nonmarket values worthcaring about. For example, we might hesitate to create a market in children on thegrounds that putting them up for sale would price less-afflfl uent parents out ofthe market or leave them with the cheapest, least desirable children (the fairnessargument). But we might also oppose such a market on the grounds that putting aprice tag on children would objectify them, fail to respect their dignity, and erodethe norm of unconditional parental love (the corruption argument).

Even where markets improve efficiency, they may be undesirable if they corruptor crowd out nonmarket norms of moral importance. So before we can decidewhether to create a market in children, for example, we have to figure out whatvalues and norms should govern the social practices of child-rearing and parenting.In this sense, market reasoning presupposes moral reasoning.

For those who assume that all values are merely subjective preferences notopen to reasoned argument, it may seem odd to suggest that some ways of valuinggoods are more appropriate, or fitting, or morally defensible than others. But suchjudgments are unavoidable, and we make them—sometimes implicitly, sometimesexplicitly—whenever we decide whether this or that good should be up for sale.

Economists are not unaware of the moral objection to monetizing all relationships.For example, Waldfogel (1993; 2009), like many economists, questions therationality of gift giving. Analyzing what he calls the “deadweight loss of Christmas,”he calculates the utility loss that results from people giving gifts rather than thecash equivalent. He attributes the practice of in-kind gift giving to “the stigma of cashgiving.” But he does not ask whether this stigma might be justified. He simply assumesit is an irrational obstacle to utility that should ideally be overcome. He does notconsider the possibility that the stigma against monetary gifts, at least among lovers,spouses, and other intimates, may reflect norms worth honoring and encouraging,such as attentiveness and thoughtfulness.

Alvin Roth (2007) also recognizes moral objections to the commodification ofcertain social practices, when he writes of “repugnance as a constraint on markets.”To contend with such repugnance, he designs in-kind kidney exchanges and othermechanisms that avoid outright buying and selling. Unlike Waldfogel, he does nottreat repugnance as an irrational, utility-destroying taboo; he simply accepts it as asocial fact and devises work-arounds. Roth does not morally assess the repugnanttransactions he discusses. He does not ask which instances of repugnance reflfl ectunthinking prejudice that should be challenged and which reflect morally weightyconsiderations that should be honored. This reluctance to pass judgment on repugnancemay reflect the economist’s hesitation to venture onto normative terrain.

But the project of devising in-kind exchanges presupposes some moral judgmentabout which instances of repugnance are justified and which ones are not.Consider human organs. Everyone recognizes that lives could be saved by increasingthe supply of organs for transplantation. But some object to the buying and sellingof kidneys on the grounds that removing an organ from one person and transferringit to another violates the sanctity and integrity of the human body.

Others object on the grounds that buying and selling kidneys objectififi es the human personby encouraging us to view our bodies as property, as collections of spare parts to beused for proffit. Still others favor a market in kidneys on the grounds that we ownourselves and should be free to profifi t from our bodies in whatever way we choose.Whether an outright market in kidneys or an in-kind exchange is morally defensibledepends, at least in part, on which of these stances toward the body and humanpersonhood is correct. If the first view is right, then all forms of organ transplantation,paid or gifted, are objectionable, notwithstanding the lives that could be saved.

If the second view is right, then gifted but not paid kidney transfers are morally defensible.Insofar as kidney exchanges preserve the gift ethic and avoid promoting a mercenary,objectifying attitude toward the human body, they address the moral concern underlyingthe second view. If the third view is right, we should not limit kidney transfers toin-kind exchanges, but should allow people to buy and sell kidneys for cash.Some of the most corrosive effects of markets on moral and civic practices areneither failures of effifi ciency in the economist’s sense, nor matters of inequality.Instead, they involve the degradation that can occur when we turn all humanrelationships into transactions and treat all good things in life as if they werecommodities.

The economic literature that acknowledges stigma and repugnancemakes implicit judgments about these questions; otherwise, it would be unableto propose either market solutions or quasi-market alternatives. But it does notarticulate and defend the basis of these judgments. Doing so would carry economicreasoning beyond the textbook distinction between positive and normative inquiryand call into question the conception of economics as a value-neutral science ofsocial choice. I will try to show how this is so by considering arguments for andagainst the use of market mechanisms in some contested contexts.-1

The Line-Standing Business

When Congressional committees hold hearings, they reserve some seats for thepress and make others available to the general public on a fifi rst-come, fifi rst-servedbasis. Corporate lobbyists are keen to attend these hearings, but are loath to spendhours in line to assure themselves a seat. Their solution: Pay thousands of dollarsto professional line-standing companies that hire homeless people and others toqueue up for them (Montopoli 2004; Copeland 2005; Lerer 2007; Palmeri 2009).

A company called LineStanding.com describes itself as “a leader in the Congressionalline standing business.” It charges $50 dollars an hour for line-standing services,of which a portion is paid to the people who stand and wait. The business has recentlyexpanded from Congress to the US Supreme Court. When the Court hears oral argumentsin big constitutional cases, the demand for seats far exceeds the supply. But ifyou are willing to pay, LineStanding.com will get you a ringside seat in the highestcourt in the land.

Business was brisk for the Obama healthcare case in July 2012, whenthe line began forming three days in advance. For the same-sex marriage cases in June2013, some people queued up five days in advance, making the price of a seat in thecourtroom about $6,000 (for reports of this practice in the popular press, see Cain2011; Smith 2013; Associated Press 2013; Liptak 2013).

On efficiency grounds, it is hard to fifi nd fault with the line-standing business.The homeless people who spend hours queuing up receive a payment that makesthe waiting worth their while. Those who employ their services gain access to aCongressional hearing or a Supreme Court argument that they are eager to attendand willing to pay for. And the company that arranges the deal makes money too.All of the parties are better off, and no one is worse off.

And yet some people object. Senator Claire McCaskill, a Missouri Democrat,has tried to ban paid Congressional line standing, without success. “The notionthat special interest groups can buy seats at congressional hearings like they wouldbuy tickets to a concert or football game is offensive to me,” she said (as quoted inO’Connor 2009; see also Hananel 2007).

But what exactly is objectionable about it? One objection is about fairness: Itis unfair that wealthy lobbyists can corner the market on Congressional hearings,depriving ordinary citizens of the opportunity to attend. But unequal access is notthe only troubling aspect of this practice. Suppose lobbyists were taxed when theyhired line-standing companies, and the proceeds were used to make line-standingservices affordable for ordinary citizens. The subsidies might take the form, say,of vouchers redeemable for discounted rates at line-standing companies. Such ascheme might ease the unfairness of the present system. But a further objectionwould remain: turning access to Congress into a product for sale demeans anddegrades it.

We can see this more clearly if we ask why Congress “underprices” admissionto its deliberations in the first place. Suppose, striving mightily to reducethe national debt, it decided to charge admission to its hearings—say, $1,000 fora front row seat at the House Appropriations Committee. Many people wouldobject, not only on the grounds that the admission fee is unfair to those unableto afford it, but also on the grounds that charging the public to attend a Congressionalhearing is a kind of corruption.

We often associate corruption with ill-gotten gains. But corruption refers to morethan bribes and illicit payments. To corrupt a good or a social practice is to degradeit, to treat it according to a lower mode of valuation than is appropriate to it (onhigher and lower modes of valuation, see Anderson 1993). Charging admission toCongressional hearings is a form of corruption in this sense. It treats Congress as if itwere a business rather than an institution of representative government accessible toall citizens.

Cynics might reply that Congress is already a business, in that it routinely sellsinflfl uence and favors to special interests. So why not acknowledge this openly andcharge admission? The answer is that the inflfl uence peddling and self-dealing thatalready afflict Congress are also instances of corruption. They represent the degradationof government in the public interest. Implicit in any charge of corruption is aconception of the purposes and ends an institution (in this case, Congress) properlypursues. The line-standing industry on Capitol Hill is corrupt in this sense. It is notillegal, and the payments are made openly. But it degrades Congress by treatingaccess to public deliberations as a source of private gain rather than an expressionof equal citizenship.

This does not necessarily mean that queuing is the best way to allocate accessto Congressional hearings or Supreme Court arguments. Another alternative,arguably more consistent with the ideal of equal citizenship than either queuingor paying, would be to distribute tickets by an online lottery, with the provision thatthey be nontransferable.

How Markets Leave Their Mark

Before we can decide whether a good should be allocated by market, queue,lottery, need, merit, or in some other way, we have to decide what kind of good itis and how it should be valued. This requires a moral judgment that economists, atleast in their role as social scientists, hesitate to make.

Part of the appeal of market reasoning is that it seems to offer a nonjudgmentalway of allocating goods. Each party to a deal decides what value to placeon the goods being exchanged. If someone is willing to pay for sex or a kidney,and a consenting adult is willing to sell, the economist does not ask whether theparties have valued the goods appropriately. Asking such questions would entangleeconomics in controversies about virtue and the common good and thus violatethe strictures of a purportedly value-neutral science. And yet it is difficult to decidewhere markets are appropriate without addressing these normative questions.

The textbook approach evades this quandary by assuming—usually implicitly—that putting a price on a good does not alter its meaning. It assumes, withoutargument, that the activity of buying and selling does not diminish the value of thethings being bought and sold. This assumption may be plausible in the case of materialgoods. Whether you sell me a flfl at screen television, or give me one as a gift, thetelevision will work just as well. But the same may not be true when market practicesextend their reach into human relationships and civic practices—sex, child rearing,teaching and learning, voting, and so on. When market reasoning travels abroad,beyond the domain of televisions and toasters, market values may transform socialpractices, and not always for the better.

Refugee Quotas and Childcare Pickups

Consider, for example, a proposal for a global market in refugee quotas. Eachyear, more refugees seek asylum than the nations of the world are willing to take in.A law professor, inspired by the idea of tradable pollution permits, suggested a solution:Let an international body assign each country a yearly refugee quota, basedon national wealth. Then, let nations buy and sell these obligations among themselves.So, for example, if Japan is allocated 10,000 refugees per year but doesn’twant to take them, it could pay Russia, or Uganda, to take them instead. Accordingto standard market logic, everyone benefifi ts. Russia or Uganda gains a new sourceof national income, Japan meets its refugee obligations by outsourcing them, andmore refugees are rescued than would otherwise fifi nd asylum (Schuck 1994, 1997).

The argument in favor of the scheme is that countries would likely accepthigher refugee quotas if they have the freedom to buy their way out. Yet there issomething distasteful about a market in refugees, even if it’s for their own good. Butwhat exactly is objectionable about it? It has something to do with the tendency of amarket in refugees to change our view of who refugees are and how they should betreated. It encourages the participants—the buyers, the sellers, and also those whoseasylum is being haggled over— to think of refugees as burdens to be unloaded or asrevenue sources, rather than as human beings in peril.

One might acknowledge the degrading effect of a market in refugees and stillconclude that the scheme does more good than harm. But the example illustratesthat markets are not mere mechanisms. They embody certain norms. They presuppose—and promote— certain ways of valuing the goods being exchanged.Economists often assume that markets are inert, that they do not touch ortaint the goods they regulate. But this is untrue. Markets leave their mark on socialnorms. Market incentives can even erode or crowd out nonmarket motivations.

A well-known study of some childcare centers in Israel shows how this canhappen (Gneezy and Rustichini 2000a). The centers faced a familiar problem:parents sometimes came late to pick up their children. A teacher had to stay with thechildren until the tardy parents arrived. To solve this problem, the centers imposeda fifi ne for late pickups. If you assume that people respond to financial incentives,you would expect the fine to reduce, not increase, the incidence of late pickups.Instead, late pickups increased.

What explains the result? Introducing the monetary payment changed thenorms. Before, parents who came late felt guilty; they were imposing an inconvenienceon the teachers. Now, parents considered a late pickup as a service forwhich they were willing to pay. They treated the fine as if it were a fee. Rather thanimposing on the teacher, they were simply paying him or her to work longer. If thegoal of the payment for late pickups was to cover the additional costs of lateness,they were arguably a success; but if the goal of the payments was to discourage latenessby penalizing it, they were a failure.

Fines versus Fees

It is worth considering the difference between a fine and a fee. Fines registermoral disapproval, whereas fees are simply prices that imply no moral judgment.When the government imposes a fifi ne for littering, it makes a statement that litteringis wrong. Tossing a beer can into the Grand Canyon not only imposes cleanup costs.

It reflects a bad attitude that we want to discourage. Suppose the fifi ne is $100, and awealthy hiker decides it is worth the convenience. He treats the fifi ne as a fee andtosses his beer can into the Grand Canyon. Even if he pays up, we consider that he’sdone something wrong. By treating the Grand Canyon as an expensive dumpster, hehas failed to appreciate it in an appropriate way.

Or consider the case of parking spaces reserved for use by the physicallydisabled. Suppose a busy but able-bodied contractor wants to park near his buildingsite. For the convenience of parking his car in a place reserved for the disabled,this contractor is willing to pay the rather large fifi ne. He considers it a cost of doingbusiness. Even if he pays the fifi ne, wouldn’t we consider that he is doing somethingwrong? He treats the fifi ne as if it were simply an expensive parking lot fee. But intreating the fifi ne as a fee, he fails to respect the needs of the physically disabledWhy Economists Should Re-engage with Political Philosophy 129and the effort of the community to accommodate them by setting aside certainparking spaces.

In practice, the distinction between a fine and a fee can be unstable. In China,the fine for violating the government’s one-child policy is increasingly regardedby the affluent as a price for an extra child. The policy, put in place over threedecades ago to reduce China’s population growth, limits most couples in urbanareas to one child. (Rural families are allowed a second child if the first one isa girl.) The fine varies from region to region, but reaches 200,000 yuan (about$31,000) in major cities —a staggering fifi gure for the average worker, but easilyaffordable for wealthy entrepreneurs, sports stars, and celebrities (Moore 2009;Bristow 2007; Coonan 2011; Ming’ai 2007).

China’s family planning offifi cials have sought to reassert the punitive aspect ofthe sanction by increasing fines for affluent offenders, denouncing celebrities whoviolate the policy and banning them from appearing on television, and preventingbusiness executives with extra kids from receiving government contracts. “The fineis a piece of cake for the rich,” explained Zhai Zhenwu, a Renmin University sociologyprofessor (Moore 2009). “The government had to hit them harder where itreally hurt, at their fame, reputation, and standing in society” (for discussion, seealso Xinhua News Agency 2008; Liu 2008).

The Chinese authorities regard the fifi ne as a penalty and want to preservethe stigma associated with it. They don’t want it to devolve into a fee. This is notmainly because they’re worried about afflfl uent parents having too many children;the number of wealthy offenders is relatively small. What is at stake is the normunderlying the policy. If the fine were merely a price, the state would find itselfin the awkward business of selling a right to have extra children to those able andwilling to pay for them.

Tradable Procreation Permits

Some Western economists have called for a market-based approach to populationcontrol strikingly similar to the one the Chinese seem determined to avoid: thatis, they have urged countries that seek to limit their population to issue tradableprocreation permits. For example, Kenneth Boulding (1964) proposed a systemof marketable procreation licenses as a solution to overpopulation. Each womanwould be issued a certififi cate (or two, depending on the policy) entitling her to havea child. She would be free to use the certififi cate or sell it at the going rate. Boulding(pp. 135 –36) imagined a market in which people eager to have children wouldpurchase certififi cates from (as he indelicately put it) “the poor, the nuns, the maidenaunts, and so on.”

The plan would be less coercive than a system of fifi xed quotas, as in a one-childpolicy. It would also be economically more effifi cient, since it would get the goods(in this case, children) to the consumers most willing to pay for them. Recently,two Belgian economists revived Boulding’s proposal. They pointed out that, sincethe rich would likely buy procreation licenses from the poor, the scheme wouldhave the further advantage of reducing inequality by giving the poor a new sourceof income (de la Croix and Gosseries 2006).Some people oppose restrictions on procreation, whether mandatory or marketbased.

Others believe that reproductive rights can legitimately be restricted to avoidoverpopulation. Set aside for the moment that disagreement of principle andimagine a society that was determined to implement mandatory population control.Which policy would be less objectionable: a fixed quota that limits each couple toone child and fines those who exceed the limit, or a market-based system that issueseach couple a tradable procreation voucher entitling the bearer to have one child?

From the standpoint of economic reasoning, the second policy is clearly preferable.The freedom to choose whether to use the voucher or sell it makes somepeople better off and no one worse off. Those who buy or sell vouchers gain (bymaking mutually advantageous trades), and those who don’t enter the market areno worse off than they would be under the fixed quota system; they can still haveone child.

And yet, there is something troubling about a system in which people buy andsell the right to have kids. Part of what is troubling is the unfairness of such a systemunder conditions of inequality. We hesitate to make children a luxury good, affordableby the rich but not the poor. Beyond the fairness objection is the potentiallycorrosive effect on parental attitudes and norms. At the heart of the market transactionis a morally disquieting activity: parents who want an extra child must induce orentice other prospective parents to sell off their right to have a child.

Some might argue that a market in procreation permits has the virtue ofeffifi ciency; it allocates children to those who value them most highly, as measuredby the ability to pay. But traffiking in the right to procreate may promote amercenary attitude toward children and corrupt the norm of unconditional loveof parents for their children. For consider: Wouldn’t the experience of lovingyour children be tainted if you acquired some of them by bribing other couplesto remain childless? Might you be tempted, at least, to hide this fact from yourchildren? If so, there is reason to conclude that, whatever its advantages, a marketin procreation permits would corrupt parenthood in ways that a fifi xed quota,however odious, would not.

In deciding whether to commodify a good, we must consider more thaneffifi ciency and fairness. We must also ask whether market norms will crowd outnonmarket norms, and if so, whether this represents a loss worth caring about.

Paying to Shoot a Walrus

Consider another kind of tradable quota—the right to shoot a walrus. Althoughthe Atlantic walrus was once abundant in the Arctic region of Canada, the massive,defenseless marine mammal was easy prey for hunters, and by the late nineteenthcentury the population had been decimated. In 1928, Canada banned walrushunting, with a small exception for aboriginal subsistence hunters whose way of lifehad revolved around the walrus hunt for 4,500 years.

In the 1990s, Inuit leaders approached the Canadian government with aproposal. Why not allow the Inuit to sell the right to kill some of their walrus quotato big-game hunters? The number of walruses killed would remain the same. TheInuit would collect the hunting fees, serve as guides to the trophy hunters, supervisethe kill, and keep the meat and skins as they had always done. The schemewould improve the economic wellbeing of a poor community, without exceedingthe existing quota. The Canadian government agreed.

Today, rich trophy hunters from around the world make their way to theArctic for the chance to shoot a walrus. They pay $6,000 to $6,500 for the privilege.They do not come for the thrill of the chase or the challenge of stalking an elusiveprey. Walruses are unthreatening creatures that move slowly and are no match forhunters with guns. In a compelling account in the New York Times Magazine, Chivers(2002) compares walrus hunting under Inuit supervision to “a long boat ride toshoot a very large beanbag chair.” The guides maneuver the boat to within 15 yardsof the walrus and tell the hunter when to shoot. Chivers describes the scene as agame hunter from Texas shot his prey: “[The] bullet smacked the bull on the neck,jerking its head and knocking the animal to its side. Blood spouted from the entrypoint. The bull lay motionless. [The hunter] put down his riflfl e and picked up hisvideo camera.” The Inuit crew then pull the dead walrus onto an ice flfl oe and carveup the carcass.

The appeal of the hunt is diffifi cult to fathom. It involves no challenge, making itless a sport than a kind of lethal tourism. The hunter cannot even display the remainsof his prey on his trophy wall back home. Walruses are protected in the United States,and it is illegal to bring their body parts into the country.So why shoot a walrus? Apparently, the main reason is to fulfifi ll the goal ofkilling one specimen of every creature on lists provided by hunting clubs —forexample, the African “Big Five” (leopard, lion, elephant, rhino, and cape buffalo),or the Arctic “Grand Slam (caribou, musk ox, polar bear, and walrus).

It hardly seems an admirable goal; many find it repugnant. But from thestandpoint of market reasoning, there is much to be said for allowing the Inuit tosell their right to shoot a certain number of walruses. The Inuit gain a new sourceof income, and the “list hunters” gain the chance to complete their roster ofcreatures killed—all without exceeding the existing quota. In this respect, sellingthe right to kill a walrus is like selling the right to procreate, or to pollute. Onceyou have a quota, market logic dictates that allowing tradable permits improvesthe general welfare. It makes some people better off without making anyoneworse off.

And yet there is something morally disagreeable about the market in walruskilling. Let’s assume, for the sake of argument, that it is reasonable to permit the Inuitto carry on with subsistence walrus hunting as they’ve done for centuries. Allowingthem to sell the right to kill “their” walruses is nonetheless open to two moral objections.First, it can be argued that this bizarre market caters to a perverse desirethat should carry no weight in any calculus of social utility.

Whatever one thinks of other forms of big-game hunting, the desire to kill a helpless mammal at closerange, without any challenge or chase, simply to complete a list, is not worthy ofbeing fulfilled. To the contrary, it should be discouraged. Second, for the Inuit tosell outsiders the right to kill their allotted walruses arguably corrupts the meaningand purpose of the exemption accorded their community in the first place. It is onething is to honor the Inuit way of life and to respect its long-standing reliance onsubsistence walrus hunting. It is quite another to convert that privilege into a cashconcession in killing on the side.\

Of course, the moral judgments underlying these objections are contestable.Some might defend the system of tradable walrus-hunting quotas on the groundsthat the desire to shoot a walrus is not perverse but morally legitimate, worthy ofconsideration in determining the general welfare. It might also be argued that theInuit themselves, not outside observers, should determine what counts as respectingtheir cultural traditions. My point is simply this: deciding whether or not to permitthe Inuit to sell their right to shoot walruses requires debating and resolving thesecompeting moral judgments.

Crowding out Nonmarket Norms

Markets in refugee quotas, procreation permits, and the right to shoot a walrus,however efficient in economic terms, are questionable policy to the extent that theyerode the attitudes and norms that should govern the treatment of refugees, children,and endangered species. The problem I am emphasizing here is not that suchmarkets are unfair to those who can’t afford the goods being sold (although thismay well be true), but that selling such things can be corrupting.

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Standard economic reasoning assumes that commodifying a good—puttingit up for sale— does not alter its character; market exchanges increase economiceffifi ciency without changing the goods themselves. But this assumption is open todoubt. As markets reach into spheres of life traditionally governed by nonmarketnorms, the notion that markets never touch or taint the goods they exchangebecomes increasingly implausible. A growing body of research confifi rms whatcommon sense suggests: fifi nancial incentives and other market mechanisms canbackfifi re by crowding out nonmarket norms.

The day care study offers one example. Introducing a monetary payment forlate arrivals increased rather than reduced the number of parents arriving late. It isno doubt true that, if the fifi ne were high enough (say, $1,000 an hour), the standardprice effect would win out. But all that matters for my argument is that introducing amonetary incentive or disincentive can sometimes corrupt or crowd out nonmarketattitudes and norms. When and to what extent the “crowding out” effect may trumpthe price effect is an empirical question. But even the existence of a “crowding out”effect shows that markets are not neutral; introducing a market mechanism maychange the character and meaning of a social practice. If this is true, deciding touse a cash incentive or a tradable quota requires that we evaluate, in each case, thenonmarket values and norms such mechanisms may displace or transform.Several other studies also demonstrate the crowding out effect:

Nuclear Waste Siting

When residents of a Swiss town were asked whether they would be willing toapprove a nuclear waste site in their community if the Parliament decided to build itthere, 51 percent said yes. Then the respondents were offered a sweetener: Supposethe Parliament proposed building the nuclear waste facility in your communityand offered to compensate each resident with an annual monetary payment.(Frey, Oberholzer-Gee, Eichenberger 1996; Frey and Oberholzer-Gee 1997; seealso Frey 1997, pp. 67–78). Adding the fifi nancial inducement did not increasethe rate of acceptance. In fact, it cut it in half —from 51 percent to 25 percent.Similar reactions to monetary offers have been found in other places where localcommunities have resisted radioactive waste repositories (Frey, Oberholzer- Gee,and Eichenberger 1996, pp. 1300, 1307; Frey and Oberholzer-Gee 1997, p. 750;Kunreuther and Easterling 1996, pp. 606–608).

Why would more people accept nuclear waste for free than for pay? For many, thewillingness to accept the waste site apparently reflfl ected public spirit—a recognitionthat the country as a whole depended on nuclear energy, and that the waste had tobe stored somewhere. If their community was found to be the safest site, they werewilling to sacrififi ce for the sake of the common good. But they were not willing to sellout their safety and put their families at risk for money. In fact, 83 percent of those whorejected the monetary proposal explained their opposition by saying they could not bebribed (Frey, Oberholzer-Gee, and Eichenberger 1996, p. 1306). The offer of a privatepayoff had transformed a civic question into a pecuniary one. The introduction ofmarket norms crowded out their sense of civic duty (Kunreuther and Easterling 1996,pp. 615–19; Frey, Oberholzer-Gee, and Eichenberger 1996, p. 1301; for an argumentin favor of cash compensation, see O’Hare 1977).

Donation Day

Each year, on a designated day, Israeli high school students go door-to-door tosolicit donations for worthy causes—cancer research, aid to disabled children, andso on. Gneezy and Rustichini (2000b) did an experiment to determine the effectof fifi nancial incentives on the students’ motivations. They divided the students intothree groups.

One group of students was given a brief motivational speech aboutthe importance of the cause, and sent on its way. The second and third groups weregiven the same speech, but also offered a monetary reward based on the amountthey collected—1 percent and 10 percent respectively. The rewards would not bededucted from the charitable donations, but would come from a separate source.Not surprisingly, the students who were offered 10 percent collected more indonations than those who were offered 1 percent. But the unpaid students collectedmore than either of the paid groups, including those who received the high commission.

Gneezy and Rustichini (2000b, 802– 807) conclude that, if you’re going to usefinancial incentives to motivate people, you should either “pay enough or don’t payat all.” While it may be true that paying enough will get what you want, there is alsoa lesson here about how money crowds out norms.

Why did both paid groups lag behind those doing it for free? Most likely, it wasbecause paying students to do a good deed changed the character of the activity.Going door-to-door collecting funds for charity was now less about performing acivic duty and more about earning a commission. The financial incentive transformeda public-spirited activity into a job for pay. As with the Swiss villagers, sowith the Israeli students: the introduction of market norms displaced, or at leastdampened, their moral and civic commitment.

Why worry about the tendency of markets to crowd out moral and civic ideals?For two reasons —one fifi scal, the other ethical. From an economic point of view,social norms such as civic virtue and public spiritedness are great bargains. Theymotivate socially useful behavior that would otherwise cost a lot to buy. If you had torely on fifi nancial incentives to get communities to accept nuclear waste, you wouldhave to pay a lot more than if you could rely instead on the residents’ sense of civicobligation. If you had to hire school children to collect charitable donations, youwould have to pay more than a 10 percent commission to get the same result thatpublic spirit produces for free.

But to view moral and civic norms simply as cost-effective ways of motivatingpeople ignores the intrinsic value of the norms. Relying solely on cash paymentsto induce residents to accept a nuclear waste facility is not only expensive; it iscorrupting. The reason it is corrupting is that it bypasses persuasion and the kindof consent that arises from deliberating about the risks the facility poses and thelarger community’s need for it. In a similar way, paying students to collect charitablecontributions on donation day not only adds to the cost of fundraising; it dishonorstheir public spirit and disfifi gures their moral and civic education.

The Commercialization Effect

Many economists now recognize that markets change the character of the goodsand social practices they govern. In recent years, one of the fifi rst to emphasize thecorrosive effect of markets on nonmarket norms was Fred Hirsch, a British economistwho served as a senior advisor to the International Monetary Fund. In a bookpublished the same year that Gary Becker’s (1976) inflfl uential work An EconomicApproach to Human Behavior appeared, Hirsch (1976) challenged the assumptionthat the value of a good is the same whether provided through the market or insome other way. Hirsch (pp. 87, 93, 92) argued that mainstream economics had overlookedwhat he called the “commercialization effect.” By this he meant “the effecton the characteristics of a product or activity of supplying it exclusively or predominantlyon commercial terms rather than on some other basis— such as informalexchange, mutual obligation, altruism or love, or feelings of service or obligation.”

The “common assumption, almost always hidden, is that the commercializationprocess does not affect the product.” Hirsch observed that this mistaken assumptionloomed large in the rising “economic imperialism” of the time, including attempts,by Becker and others, to extend economic analysis into neighboring realms of socialand political life. The empirical cases we’ve just considered support Hirsch’s (1976)insight—that the introduction of market incentives and mechanisms can changepeople’s attitudes and crowd out nonmarket values.

A growing body of work in social psychology offers a possible explanationfor this commercialization effect. These studies highlight the difference betweenintrinsic motivations (such as moral conviction or interest in the task at hand) andexternal ones (such as money or other tangible rewards). When people are engagedin an activity they consider intrinsically worthwhile, offering them money mayweaken their motivation by depreciating or “crowding out” their intrinsic interest orcommitment. (For an overview and analysis of 128 studies on the effects of extrinsicrewards on intrinsic motivations, see Deci, Koestner, and Ryan 1999).

Standard economic theory assumes that all motivations, whatever their characteror source, are additive. But this misses the corrosive effect of money. The“crowding out” phenomenon has far-reaching implications for economics. It callsinto question the use of market mechanisms and market reasoning in many aspectsof social life, including the use of fifi nancial incentives to motivate performance ineducation, health care, the workplace, voluntary associations, civic life, and othersettings in which intrinsic motivations or moral commitments matter ( Janssen andMendys -Kamphorst 2004).

Blood for Sale

Perhaps the best-known illustration of markets crowding out nonmarket normsis a classic study of blood donation by the British sociologist Richard Titmuss. Inhis book The Gift Relationship, Titmuss (1971) compared the system of blood collectionused in the United Kingdom, where all blood for transfusion was given byunpaid, voluntary donors, and the system in the United States, where some bloodwas donated and some bought by commercial blood banks from people, typicallythe poor, who were willing to sell their blood as a way of making money. Titmusspresented a wealth of data showing that, in economic and practical terms alone,the UK blood collection system worked better than the American one. Despite thesupposed effifi ciency of markets, he argued, the American system led to chronicshortages, wasted blood, higher costs, and a greater risk of blood contaminated byhepatitis (pp. 231–32).

But Titmuss (1971) also leveled an ethical argument against the buying andselling of blood. He argued that turning blood into a market commodity erodedpeople’s sense of obligation to donate blood, diminished the spirit of altruism, andundermined the “gift relationship” as an active feature of social life. “Commercializationand profifi t in blood has been driving out the voluntary donor,” he wrote.Once people begin to view blood as a commodity that is routinely bought and sold,Titmuss (pp. 223–24, 177) suggested, they are less likely to feel a moral responsibilityto donate it.

Titmuss’s book prompted much debate. Among his critics was Kenneth Arrow(1972). In taking issue with Titmuss, Arrow invoked two assumptions about humannature and moral life that economists often assert but rarely defend (for an insightfulcontemporary reply to Arrow, see Singer 1973). The fifi rst is the assumption I haveexamined above, that commercializing an activity doesn’t change it. According tothis assumption, if a previously untraded good is made tradable, those who wishto buy and sell it can do so, thereby increasing their utility, while those who regardthe good as priceless are free to desist from traffifi cking in it. This line of reasoningleans heavily on the notion that creating a market in blood does not erode the valueor meaning of donating blood out of altruism. Titmuss attaches independent moralvalue to the generosity that motivates the gift. But Arrow (1972, p. 351) doubtsthat such generosity could be diminished or impaired by the introduction of amarket: “Why should it be that the creation of a market for blood would decreasethe altruism embodied in giving blood?”

The answer is that commercializing blood changes the meaning of donatingit. In a world where blood is routinely bought and sold, giving it away for free maycome to seem a kind of folly. Moreover, those who would donate a pint of blood attheir local Red Cross might wonder if doing so is an act of generosity or an unfairlabor practice that deprives a needy person of gainful employment selling his blood.If you want to support a blood drive, would it be better to donate blood yourself, orto donate $50 that can be used to buy an extra pint of blood from a homeless personwho needs the income?

The second assumption that figures in Arrow’s (1972) critique is that ethicalbehavior is a commodity that needs to be economized. The idea is this: We shouldnot rely too heavily on altruism, generosity, solidarity, or civic duty, because thesemoral sentiments are scarce resources that are depleted with use. Markets, which relyon self-interest, spare us from using up the limited supply of virtue.

So, for example, if we rely on the generosity of the public for the supply of blood, there will be lessgenerosity left over for other social or charitable purposes. “Like many economists,”Arrow (1972, pp. 354–55) writes, “I do not want to rely too heavily on substitutingethics for self-interest. I think it best on the whole that the requirement of ethicalbehavior be confifi ned to those circumstances where the price system breaks down. . . We do not wish to use up recklessly the scarce resources of altruistic motivation.”It is easy to see how this economistic conception of virtue, if true, provides yetfurther grounds for extending markets into every sphere of life. If the supply ofaltruism, generosity, and civic virtue is fifi xed, as if by nature, like the supply of fossilfuels, then we should try to conserve it. The more we use, the less we have. On thisassumption, relying more on markets and less on morals is a way of preserving ascarce resource.

Economizing Love

The classic statement of this idea was offered by Sir Dennis H. Robertson (1954),a Cambridge University economist and former student of John Maynard Keynes,in an address at the bicentennial of Columbia University. The title of Robertson’slecture was a question: “What does the economist economize?” He sought to showthat, despite catering to what he called (p. 148) “the aggressive and acquisitiveinstincts” of human beings, economists nonetheless serve a moral mission.Robertson (1954) claimed that by promoting policies that rely, wheneverpossible, on self-interest rather than altruism or moral considerations, the economistsaves society from squandering its scarce supply of virtue. “If we economists do[our] business well,” Robertson (p. 154) concluded, “we can, I believe, contributemightily to the economizing . . . of that scarce resource Love,” the “most preciousthing in the world.”

To those not steeped in economics, this way of thinking about the generousvirtues is strange, even far-fetched. It ignores the possibility that our capacity forlove and benevolence is not depleted with use but enlarged with practice. Thinkof a loving couple. If, over a lifetime, they asked little of one another, in hopes ofhoarding their love, how well would they fare? Wouldn’t their love deepen rather thandiminish the more they called upon it? Would they do better to treat one another inmore calculating fashion, to conserve their love for the times they really needed it?Similar questions can be asked about social solidarity and civic virtue. Shouldwe try to conserve civic virtue by telling citizens to go shopping until their countryreally needs them? Or do civic virtue and public spirit atrophy with disuse? Manymoralists have taken the second view. Aristotle (Nicomachean Ethics, Book II, chap. 1,pp. 1103a–1103b) taught that virtue is something we cultivate with practice: “Webecome just by doing just acts, temperate by doing temperate acts, brave by doingbrave acts.”

Rousseau (1762 [1973] Book III, chap. 15, pp. 239 – 40) held a similar view.The more a country asks of its citizens, the greater their devotion to it. “In a wellorderedcity every man flfl ies to the assemblies.” Under a bad government, no oneparticipates in public life “because no one is interested in what happens there”and “domestic cares are all-absorbing.” Civic virtue is built up, not spent down, bystrenuous citizenship. Use it or lose it, Rousseau says, in effect. “As soon as publicservice ceases to be the chief business of the citizens, and they would rather servewith their money than with their person, the state is not far from its fall.”

The notion that love and generosity are scarce resources that are depleted withuse continues to exert a powerful hold on the moral imagination of economists,even if they don’t argue for it explicitly. It is not an offifi cial textbook principle, likethe law of supply and demand. No one has proven it empirically. It is more like anadage, a piece of folk wisdom, to which many economists nonetheless subscribe.Almost half a century after Robertson’s lecture, Lawrence Summers, then thepresident of Harvard University, was invited to offer the Morning Prayers address inHarvard’s Memorial Church. He chose as his theme what “economics can contributeto thinking about moral questions.”

Economics, Summers (2003) stated, “is too rarelyappreciated for its moral as well as practical significance.” Summers observed that economistsplace “great emphasis on respect for individuals—and the needs, tastes, choices,and judgments they make for themselves.” He illustrated the moral implications ofeconomic thinking by challenging students who had advocated a boycott of goodsproduced by sweatshop labor: “We all deplore the conditions in which so many on thisplanet work and the paltry compensation they receive. And yet there is surely somemoral force to the concern that as long as the workers are voluntarily employed, theyhave chosen to work because they are working to their best alternative. Is narrowing anindividual’s set of choices an act of respect, of charity, even of concern?”

Summers (2003) concluded with a reply to those who criticize markets forrelying on selfishness and greed: “We all have only so much altruism in us. Economistslike me think of altruism as a valuable and rare good that needs conserving. Farbetter to conserve it by designing a system in which people’s wants will be satisfifi edby individuals being selfifi sh, and saving that altruism for our families, our friends,and the many social problems in this world that markets cannot solve.”

Here was Robertson’s (1954) adage reasserted. This economistic view of virtuefuels the faith in markets and propels their reach into places they don’t belong. Butthe metaphor is questionable. Are altruism, generosity, solidarity, and civic spiritlike commodities that are depleted with use? Or are they more like muscles thatdevelop and grow stronger with exercise?

Market Reasoning as Moral Reasoning

To answer this question is to take sides in a long-standing debate in moral andpolitical philosophy. We have now seen two ways in which economic reasoning restson contestable normative assumptions. One is the assumption that subjecting agood to market exchange does not alter its meaning; the other is the claim thatvirtue is a commodity that is depleted with use.

The extension of market thinking into almost every aspect of social life complicatesthe distinction between market reasoning and moral reasoning, betweenexplaining the world and improving it. Where markets erode nonmarket norms, weneed to ask whether this represents a loss worth caring about.

Do the efficiency gains of tradable refugee quotas outweigh the degrading effect they may inflict on refugees?Are the economic benefits of commercialized walrus hunts worth the coarsened attitudestoward endangered species they may engender and promote?

Should we worry if cash compensation for civic sacrifice turns patriotic sentiments to pecuniary ones?

Questions such as these carry us beyond predicting whether a market mechanismwill “work” in a narrow sense. They require that we make a moral assessment:What is the moral importance of the attitudes and norms that money may crowdout? Would their loss change the character of the activity in ways we would regret?If so, should we avoid introducing financial incentives into the activity, even thoughthey might offer certain benefits?

To decide when to use cash incentives, or tradable permits, or other marketmechanisms, economists must go beyond identifying the norms that inform socialpractices; they must also evaluate those norms. The more economic thinking extendsits reach into social and civic life, the more market reasoning becomes inseparablefrom moral reasoning. If economics is to help us decide where markets serve thepublic good and where they don’t belong, it should relinquish the claim to be a valueneutralscience and reconnect with its origins in moral and political philosophy.

■ I am grateful to the editors of this journal, David Autor, Timothy Taylor, and UlrikeMalmendier, for their challenging comments and criticisms. Timothy Besley’s recentlypublished essay (Besley 2013) on my book What Money Can’t Buy helped me sharpen thearguments of this paper, as did a valuable conversation with Peter Ganong. I would alsolike to thank Robert Frank and the participants in New York University’s Paduano seminar,and my colleagues in Harvard Law School’s summer faculty workshop, for instructive andpenetrating discussions of an earlier version of this paper.